The transition to modern energy services

As poor families in developing countries gradually increase their incomes, they can afford more modern appliances, and they demand more and better energy services. But the transition from traditional biomass use to full dependence on modern energy forms is not a straight-line process. In 2010, almost 2.6 billion people relied on the traditional use of biomass for cooking, almost 4 out of 10 persons of the global population.

The three main determinants in the transition from traditional to modern energy use are fuel availability, affordability and cultural preferences. If a modern distribution system is not in place, households cannot obtain access to modern fuels, even if they can afford them. LPG penetration rates are slow in many developing countries, partly because distribution infrastructure is lacking.

The affordability of energy-using equipment is just as important as the affordability of fuels and the initial cost of acquiring kerosene and LPG stoves may discourage some people from switching away from biomass. In some cases, traditions determine the fuel choice regardless of fuel availability and income. In India, even very rich households keep a biomass stove to prepare traditional bread.

Figure 1 shows the relationship between fuel use and income across a range of developing countries. In low-income countries, final consumption of energy in the residential, services, industry and transport sectors is low and is comprised mainly of biomass. In high-income developing countries, the fuel mix is much more diverse and the overall amount of energy consumed is much higher. Demand for mobility, which is indicated where the share of other petroleum products in final energy consumption is high, is much greater in countries with a very low percentage of the population living on less than $2 a day.

Figure 1The relationship between per-capita final energy consumption and income in developing countries

Source: WEO-2010

Note: Average per-capita final energy consumption is 3.1 toe in OECD countries (WEO-2010). Other petroleum products are mostly consumed in the transport sector.

There are also rural-urban differences in the fuel choices, as in rural zones availability of fuels is the main determinant while in cities consumption patterns are more likely to be affected by relative fuel prices.

Figure 2 provides an illustration of the quality of energy services for cooking and lighting as income rises at the household level. The figure is reflective of energy consumption in rural households, but some of the principles also apply to peri-urban and urban households. The concept of a simple “energy ladder”, with households moving up from one fuel to another, does not adequately portray the transition to modern energy access, because households use a combination of fuels and technologies at all income levels. This use of multiple fuels is a result of their differing end-use efficiency, of affordability and of social preferences, such as a particular fuel for cooking. Moreover, use of multiple fuels improves energy security, since complete dependence on a single fuel or technology leaves households vulnerable to price variations and unreliable service.

Figure 2The quality of energy services and household income

Source: WEO-2010

Note: CFL is compact fluorescent light bulb; LPG is liquefied petroleum gas; and LED is light-emitting diode. Improved cookstoves have higher efficiency than cooking over a three-stone fire, but emissions are not reduced considerably, while advanced biomass cookstoves have equivalent efficiency and emissions reductions as liquid-fuel, gas and electric stoves.

The indicator of the quality of delivered energy services on the vertical axis in Figure above is designed to capture a variety of dimensions, including cleanliness, efficiency and affordability. Because the amount of energy delivered from traditional technologies, such as a three-stone fire or kerosene/diesel lanterns, is much lower than that from modern services, such as electricity, poorer households pay a much higher share of their income on energy services. A study of rural energy use in Bangladesh found that, for example, the cost of each kilolumen-hour from incandescent light bulbs or fluorescent tubes is less than 2% of the cost of comparable lighting services from kerosene lamps. Access to electricity accordingly can reduce total household energy costs dramatically, if upfront costs related to the connection are made affordable. In addition, successful energy efficiency initiatives reduce electricity demand, which has the secondary benefit that existing generation plants can be used to supply new households, thereby reducing the need for capacity additions.